How to Get Out of Debt

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Show Notes

We Google a lot of things for the entertainment value, like “do a barrel roll” (go ahead—try it!). We also ask questions when we want to learn more: “What’s the absolute best way to make pizza?” And sometimes we search in desperation for things like: “How to get out of debt?”

Resources

When it comes to pizza recipes, Google hasn’t failed me yet. But when it comes to debt, there seems to be a lot of misinformation out there.

So today, my goal is to fix that! By the end of this episode, you’ll walk away feeling better prepared to pay off debt and more hopeful about becoming debt-free. This will be better than any old search on the internet.

Let’s not waste another minute, okay?

What Is Debt?

Maybe this sounds like an easy question with an obvious answer. But from my talks with people all across America, I’ve found that plenty of college students and grown adults don’t understand the actual definition of debt.

Before we can talk about getting out of debt, we have to make sure we’re on the same page when we talk about being in debt.

Because here’s the truth: 78% of Americans live paycheck to paycheck.(1)You guys, that number was much lower not too long ago. It just keeps going up! Why? Because of debt. Debt has become such a normal way of life that we don’t even stop to think before we take on more of it.

If you want to break the paycheck-to-paycheck cycle, you have to get out of debt. And if you’re going to get out of debt, you have to know what debt is. So here goes:

Debt is owing anything to anyone for any reason.

It’s that simple.

Let Me Break It Down for You

I had a college student approach me at an event once. He had a huge smile on his face as he said, “Rachel, I’m debt-free!” So great, right? I mean, a college student with no debt is like a unicorn.

So I asked him, “How are you paying for school? Do your parents cover the cost of your tuition? Do you work part time? Did you get scholarships?” I couldn’t wait to hear his story.

But he just looked at me like I was crazy. He said, “No, I have about $36,000 in student loans. But I’m debt-free!”

You guys. I hear this stuff all the time:

“We’re debt-free. Our car loan is just really high.”

“We’re debt-free. We pay the credit card off almost every month.”

“We’re debt-free. We only borrow money from family.”

Debt is debt, right? And what is debt?

Let’s take another look: Debt is owing anything to anyone for any reason. If someone else pays for something on your behalf and requires you to pay it back—and it’s not a gift—guess what? That’s called debt.

I know, I know. I’m a total Debbie Downer right now. But you’ve got to hang with me, because it’s only when we get honest about our debt that we have any chance of getting rid of it.

How to Get Out of Debt Quickly—and Why You Should Want To

That’s because debt totally limits your freedom. The Bible says it this way: “The borrower is slave to the lender” (Proverbs 22:7 NIV). Being in debt really can make you feel like a slave. You don’t get to choose how you’ll spend your hard-earned income. Instead, you send it straight to your lender.

And all the while, you’re racking up interest as debt takes an emotional, spiritual and financial toll. Maybe you’re feeling the pain right now as you read these words.

Here’s what I want you to do: Get mad. No, really. Take a minute to think about what debt is doing to your life. Consider how it makes you feel, what it does to your money , and how it might affect your children. And let yourself get mad.

When you get angry, change can occur. When you can say, I’m going to do whatever it takes to get rid of debt once and for all, then you actually will. You may wander into debt, but you can’t wander out. You have to fight against debt with intention and determination.

You bring the “I’m it” attitude, and we’ll give you the know-how to tackle debt.

A Step-by-Step Guide for Getting Out of Debt

This proven approach is all about building momentum and motivation as you go along. With the debt snowball, people pay off consumer debt—that means everything but the house—in about 18 to 24 months on average, regardless of income level or total debt amount.

Here’s how the debt snowball method works:

List your debts in order of smallest to largest, regardless of interest rate.

Pay minimum payments on all debts except the smallest debt.

Put every dollar you can find toward the smallest debt. You might quit going out to eat, stop buying clothes, cancel your cable, or take on a second job.

Continue with this plan until you pay off the first debt. Do a happy dance!

Now, make minimum payments on all debts except the second smallest debt.

Put every dollar you can find, including the money you were sending to the smallest debt, toward the second debt.

Continue with this plan until you pay off the second debt, the third, the fourth, and so on! Repeat until you’re debt-free!

Are you catching the rhythm here? When you pay off that first debt, you get a little glimmer of progress and even hope. And then your multiply as you pay off another debt and another and another!

How to Protect Your Income When Paying Off Debt

Getting out of debt not only makes today better, but it also takes care of your family’s financial future in a powerful way. Another way to make sure your family is taken care of is by getting term life insurance.

I know this isn’t a fun topic, but it’s a necessary one! You want to make sure that if something happens to you or your spouse, your hard work isn’t undone. Whether you’re getting out of debt, building an emergency fund, saving for a house, or accomplishing other big money goals, your family needs term life insurance.

For the best coverage, consider an amount between 10 to 20 times your income and a term of between 15 to 20 years.

Winston and I trust Zander Insurance to take care of our family. They’ll shop for the best rates to meet your specific needs. Get started with a quote today!

The “Debt I Hate Most” Poll

Just talking about debt has me all fired up. And I’m wondering: What debt do you hate the most right now? Which one are you so ready to see gone from your life for good? Comment below!

How My Parents Changed My Life Forever

When it comes to healthy money habits, budgeting is the one that’s hardest for me. I’m a free spirit, and I love to spend! But I don’t love debt. The decision to live debt-free was an easy one.

My parents filed for bankruptcy the year I was born. They had taken on a lot of debt, and the experience caused them both deep pain. Mom and Dad decided, right then and there, to never go into debt again. Debt became a four-letter word in our home.

And so, my childhood was a living example of what I teach. When I was young, we didn’t go out to eat. We didn’t go shopping or on vacation. They sacrificed so much in order to avoid debt. And I’m eternally grateful for the life they made for our family.

Of course, I didn’t learn this lesson from just my mom and dad. As my dad’s message of hope began to spread, I traveled with him to events across the country. I saw the pain so many others endured as a result of debt. And I became passionate, just like my dad, to offer hope for families wanting out.

The Power of a Debt-Free Scream

People call, drive and fly in from all over America to share their stories on my dad’s radio show. Our team loves to go out and meet the families: the single mom with a teenage son and a paid-in-full credit card statement or the 56-year-old couple with a paid-off mortgage. We love to cheer with them as they celebrate such a huge accomplishment.

But I’ve got to say, meeting families is my favorite. I love seeing the lobby door swing open as a five-year-old boy sprints inside after being in the car for eight hours. The mom follows him with a toddler on her hip, and the dad totes a brand-new baby in a carrier.

They’re tired, but they made it. This family may look like an ordinary family, but we all know what they did is extraordinary. They’ll put headphones on and join The Dave Ramsey Show to talk about how they took on extra jobs for the last two years. And I think, How much did they sacrifice to become debt-free? How many soccer games did he miss? How many nights did she put the kids to bed by herself? But they did it—all for the good of their family!

As their story comes to a close, and they get ready to celebrate, the mom and dad bend down to their young children. The moment they practiced for hours in the car is finally here. And in unison, with little chipmunk voices, the kids and their parents scream, “We’re debt-free!”

And I cry every time. I cry because I think, I was that little girl. My parents could have chosen a life of stress and debt. But they chose a different path, and because of that, my life is forever changed!

Parents, can I encourage you? If you’re working to get out of debt, it’s not just for you. You’ll leave a legacy for your family that spans generations! We usually say you’re changing your family tree. What could be more motivating than that?

How One Couple Got Out of Debt—Mortgage and All!

I love that right on the heels of talking about debt-free screams, I got to sit down with Kari and Joey, a young couple who have two daughters and a mortgage-free home! They did their own debt-free scream on the The Dave Ramsey Show before coming to chat with me.

We talked about what inspired them to become completely debt-free, including paying off their mortgage (which is the only debt I won’t yell at you about), and how they actually accomplished their goal.

Here are a few of the best takeaways you can apply to your own debt-free journey:

Make friends with automatic draft. Kari and Joey set their payments to automatically withdraw from their bank account each month. They didn’t have to decide between paying off the mortgage or putting the money toward something else. It just happened, and those automatic payments held them accountable!

Think outside the box. These guys survived six years of marriage and two kids with just one car! What could you do without, move around, or sacrifice for now in order to hit your goal that much sooner?

Stop buying so much stuff. Joey’s advice for anyone hoping to get out of debt: Stop buying stuff. We can all buy too much, can’t we? Imagine how much money you could put toward debt if you stopped buying stuff you really don’t need.

Soon Kari and Joey plan to make their first big purchase after paying off debt: a second family car—with CASH! And even though Joey works in sales with its feast-or-famine pay cycles, they feel safe and secure in the knowledge that they owe nothing to no one . They’re debt-free!

Want to eat out less, but don’t think you have enough time to make meals at home?

24 Ways to Get of Debt on a Low Income

To get out of debt you’ve got to spend less, but you also need to bring in more. My grandmother would always say, “The best place to go when you’re broke is to work.”

Maybe you’re a stay-at-home mom or already have a full-time job and your income just isn’t working enough for you. That’s okay! Check out this super-specific list of ideas for making more money. You might just be inspired to start a side hustle of your own!

Before you take on a new job or side hustle, it’s important to ask yourself:

What does my schedule allow?

What are the needs in my local area?

What am I really good at?

How far am I willing to go to get out of debt?

How to Make Extra Money to Pay Off Debt

Try pet sitting

Offer private sports lessons

Rent your house out as an Airbnb

Offer landscaping services

Start a housecleaning business

Meal prep for friends and family

Tutor

Babysit or offer childcare services

If you like to drive a car:

Drive for Uber or Lyft

Do grocery delivery with a company like Shipt

Be a food deliverer for GrubHub, UberEats, Delivery Dudes

Sign up to deliver for Postmates

If you’d like to work from home:

Use your photography skills and offer stock photography

Try your hand at calligraphy

Bake cakes

Offer monogramming services

Sell your clothes at consignment stores or websites like Poshmark and thredUp

Offer private music lessons

Build PowerPoint presentations

Offer transcribing services

Be a virtual personal assistant

If you're a neat freak:

Offer home-organizing services

Detail cars

Want to know the best idea of all?

Start a membership to Financial Peace University. Most of you say your friends don't think debt is a big deal. That’s why it's critical to surround yourself with other people who are on the same journey to becoming debt-free. The Financial Peace University community will keep you pumped and moving forward.

On average, people who complete Financial Peace University pay off $5,300 and save $2,700 in the first 90 days! Get started today!

If These People Can Pay Off Debt, So Can You!

My favorite segment ever is back with a special debt-free edition:

"Feels amazing to officially own my car!" — Koolaberg

“I always feel like I want to scream to the mountains every time my husband and I pay off another student loan. My heart explodes with much joy and happiness with each milestone we hit while working to become DEBT-FREE. We’ve been chipping away with gazelle intensity ever since I graduated from nursing school almost two years ago, and we have a goal of being 100% debt-free by December 31 (eeeeeek)!" — Kenzie

"Paid for IN CASH!” 💵 Wow, that’s a crazy sentence to say! It’s been a few months since Brian and I moved into this beautiful house DEBT-! I still can’t believe that we actually OWN this house, like paid for IN CASH! No payments! Nada! ZIP! It’s been a long journey to get where we are, but we are so excited for this new chapter of our lives! And we couldn’t be more thankful to Jesus for it! 🙌" — Mrs. Leighty

If you’re working hard to pay off debt or save money, be sure to check out our goal trackers to keep you motivated!

And as always, keep taking control of your money and create a life you love!

Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programing. Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programing you are viewing: Zander Insurance, Home Chef